Need-Seeking Firms

Strategy

An alert through Twitter put me onto the above article, which appeared relevant given my own view that WA could be the high-tech hot bed of Australia. It might not replicate Silicon Valley, but with 5 Universities, our world-leading remote mine operations, and aluminium production etc [1]we could, and should, reasonably invest in this sector as a source of competitive advantage for Western Australia (see Porter, Competitive Advantage of Nations).

But what struck me with more immediacy was the term “need-seeking” in relation to the types of companies that dominate the Valley. Research by Booz & Co found 3 basic innovation strategies being employed by different types of firms. Need-seekers focus on identifying and understanding their customers’ actual need, both explicit and implicit, determining how best to satisfy those needs; and getting their product or service to market as fast as possible.

The second type of firm are “technology drivers”, which are strategically led by their engineering departments rather than by customers. The third category is that of “market leaders” who rely on an incremental, fast-follower approach. According to Booz & Co, the need-seekers “consistently outgrow the other two over a five-year span, both in gross profits and in company value”.

Key to this is creating your innovation strategy (the one to meet customer need) at the highest level:

In research Barrington did in 1995, we found over 1,000 Perth based firms were involved in some way in R&D. Add to that the very entrepreneurial spirit that exists in West Australia within your organisation. As always, the strategy must be communicated throughout the company.

But does all the innovation have to occur in-house? As it turns out, no. The NIH (not invented here) syndrome has no place in need-seeker companies.

The research crystalises three key attributes of the successful Silicon Valley firms: